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You could be forgiven for thinking the rise of the financial influencer had happened overnight, judging from the attention it’s attracted. It was not so surprising to the Australian Securities & Investments Commission (ASIC) given we had been carefully monitoring their rise through social media for some time – well before the release Information Sheet 269: Discussing financial products and services (INFO 269). 

“We’ve been observing changes in the way retail investors access financial information, particularly since the onset of COVID-19, and there’s several reasons for that - and not just specific to Australia,” said ASIC’s Greg Yanco, Executive Director of Markets. “There’s a number of dynamics at play which have ushered in a new era of on-line financial discussion.”

Certainly, the pandemic has played a part, as investing became easier and cheaper. The buying opportunity created by the 2020 market correction was accompanied by a wave of neo-brokers offering new, trendy share-trading apps boasting “free brokerage.”

With a booming audience ready to start their journey to financial freedom, young, savvy social-media content creators, dubbed “finfluencers”, were well positioned to meet the new demand. Appealing to the next-gen of retail investors, with voices similar to theirs, financial influencers swiftly positioned themselves as financial educators. With neither a licence nor the appropriate training, they have used social media platforms as free distribution channels and seized the opportunity to generate an income.

As their popularity has grown, Australian Financial Services (AFS) licensees also recognised the opportunities and fostered the phenomenon by using influencers to increase their targeted investor base. 

ASIC’s view on ‘finfluencers’

ASIC’s message to investors is clear. “On-line discussion about financial products and services can provide helpful insights for investors and we encourage people to take an interest in their financial futures,” says Yanco. “But we want this to happen in a safe and balanced environment. Where financial influencers are operating a financial services business without holding an AFS licence, this creates risks for investors of receiving poor or misleading advice. The financial services laws exist for a reason and provide important consumer protections should something go wrong.”

Contrary to the general perception, the laws outlined in ASIC’s information sheet are not new. Yanco warned “it's important to remember that whatever the medium, financial services laws still apply when providing financial advice and dealing in financial products – and doing this in the on-line environment, including social media platforms, discussion forums, websites and blogs, makes no difference."

In 2021, ASIC reviewed the role and activities of some financial influencers as part of a broader scan of the social media landscape. It found that influencer activity risked straying into featuring and promoting financial products that could amount to unlicensed advice and dealing. “We saw a need to intervene and provide clarity on the law, and what ‘crosses the line’, and INFO 269 was the vehicle to do this. If retail investors were to act on what they were exposed to on social media, it could be to their detriment.”

Yanco hopes the publication provides clarity to financial influencers so they can make the necessary adjustments to their content. “We’re keen to see a change in their behaviour so that consumers can safely navigate on-line financial discussion. There’ll still be lots of it out there and that’s OK, just so long as it complies with the law.”

ASIC is also taking steps to position itself on social media with a series of Facebook and Instagram campaigns to raise awareness amongst investors of the risks of relying on social media when making investment decisions. In October 2021, the regulator also took the unprecedented step of directly engaging with people on Telegram (a social media App) to disrupt blatant “pump and dump” sharemarket activity, which might involve serious offences. 

Stay informed

So, what can investors do to protect themselves from unlicensed, inaccurate or potentially misleading on-line activity? 

Simple: they need to recognise that relying on social media can be risky. 

“If investors take the time to do their own checks to review public company information and research, and consider seeking professional financial advice, they’ll be far better placed,” Yanco says. “ASIC’s MoneySmart website is also a really great resource if you’re looking for information on how to invest and what to look out for. 

“You can also access our Financial advisers register to find out where a financial adviser has worked, their qualifications, training, memberships of professional bodies and what products they can advise on.”

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The views, opinions or recommendations of the author in this article are solely those of the author and do not in any way reflect the views, opinions, recommendations, of ASX Limited ABN 98 008 624 691 and its related bodies corporate (“ASX”). ASX makes no representation or warranty with respect to the accuracy, completeness or currency of the content. The content is for educational purposes only and does not constitute financial advice.  Independent advice should be obtained from an Australian financial services licensee before making investment decisions. To the extent permitted by law, ASX excludes all liability for any loss or damage arising in any way including by way of negligence.